Ludwig von Mises (1881-1973) and Friedrich Hayek (1899-1992) were perhaps the foremost defenders of the free market and limited government during the mid-twentieth century ascendancy of Keynesian economics.

Joseph Schumpeter and Dynamic Economical Change

Joseph Schumpeter (1883-1950) viewed capitalism as a dynamic engine of progress. In his view, mature economic systems find a regular and stable routine of supply, demand, and exchange; Schumpeter called this the "circular flow". Entrepreneurs interrupt this circular flow with new ideas and visions about the economic future, recombining existing resources to create new and more valuable products and services.

The Vision of Leon Walras

Leon Walras (1834-1910) transformed economics from a literary discipline into a mathematical, deterministic science. For the first time, Walras expressed rigorously the view that all markets are related, and that their relationships can be described and analyzed mathematically.

Monetarism and Supply Side Economics: Free Market Thought in the Late 20th Century

Dr. Arjo Klamer: Monetarism emerged in the 1960's under the leadership of Milton Friedman, who received the Nobel Prize in 1976. Friedman taught at the University of Chicago during this period, developing monetarism as a branch of Frank Knight's famous "Chicago School" of economics. Monetarists emphasize the role of money and the government's monetary policy in economic affairs; they vigorously defend the free market in their work.

The Classical Economists

The classical economists pioneered a new way of thinking about the uniquely human tendency to produce, trade, consume, and accumulate. Adam Smith (1723-1790) explained how the division of labor expands productive power and argued for freedom in economic affairs. David Ricardo (1772-1823), a London stockbroker, developed the concept of diminishing returns, the wages-fund doctrine, and classical rent theory.

Frank Knight and the Chicago School: The Role of Economic Uncertainty

Frank Knight (1885-1972) fathered the famous Chicago School of Economics, whose members are among the most decorated in history. An abstract theorist, Knight emphasized the role of risk and uncertainty in economic affairs, and was philosophically concerned with such topics as means vs. ends, economics as a study of human nature, and human communication.

The Keynesian Revolution

John Maynard Keynes (1883-1946) was without question the most influential economist of the twentieth century. His most important work, The General Theory of Employment, Interest, and Money, was published in 1936, and it was widely perceived as offering plausible explanations and solutions for the Great Depression.<

The German Historical School of Economics

Beginning in the early 1840's, a group of German university professors denounced the abstract theories of classical economists, rejecting theoretical analysis in favor of a historical approach. They believed that theories only express what happens in a simplified world, not in the real world, and that they offer little solution to the pressing social problems of the underprivileged.

Early Austrian Economics

Carl Menger (1840-1921) and Eugen von Bohm-Bawerk (1851-1914), working in Vienna in the late nineteenth century, rejected the classical and Marxian ideas that value can be measured objectively. They insisted that the subjective preferences of consumers determine value; this shifted the attention of economic analysis from productive power to consumer demand.

Alfred Marshall and Neoclassicism: Economics Becomes a Science

Alfred Marshall, a British economics professor at Oxford University, developed economics into a more rigorous, professional discipline than ever before. He invented concepts such as price elasticity, the representative firm, consumer's surplus, and other ideas that significantly enlarged the "analytical tool kit" of the economist.

Karl Marx: Das Kapital

In his monumental work, Das Kapital, Karl Marx (1818-1883) tried to show that capitalism was both inefficient and immoral. His key to explaining capitalism is his labor theory of value, which he developed from ideas of Adam Smith and David Ricardo.

Since World War II, economists have struggled to understand the Keynesian Revolution and to apply its lessons to the modern economy. The heart of the debate over Keynes' radical ideas has been whether they could or should be reconciled with the older, neoclassical economic theory.

Investment Philosophers and Financial Economists

Saving, budgeting, and investing are keys to creating wealth, but there are many different philosophies about how to approach this essential task. The "investment philosophers" offer systematic beliefs about investing that often parallel other systems of human conduct (e.g. Taoism, the hunter-warrior). The financial economists (e.g. Fisher, Keynes) offer insights about how human behavior is collectively expressed in markets.

St. Thomas Aquinas: The Giants of Philosophy

St. Thomas Aquinas is known for producing history's most complete system of Christian philosophy. In the late 13th century, this quiet, reflective Dominican scholar combined the work of Aristotle with Christian, Jewish, Muslim, and pagan thought to reconcile reason and faith. For Thomas, intellectual knowledge is a sign of the spirituality that energizes the human center. He believed we can know that God exists, but not what God is like.

David Hume: The Giants of Philosophy

David Hume (1711-1776) represented the culmination of the British philosophy of sense-experience. Although he lived in the age of reason, Hume had profound doubts about our ability to know anything in the world with certainty. This skepticism colored his view of science and gave rise to his devastating attack on proofs of the existence of God.

Science in Antiquity

The scientific impulse can be said to have existed forever. But only with the written word did there emerge a record of speculations about how and why things happen. Middle Eastern civilizations developed ways to measure and describe (e.g., math and the alphabet); Greek philosophers classified natural objects and studied cause and effect. This is the story of ancient science from Asia to the Mediterranean Basin.

Darwin and Evolution

In 1859, Charles Darwin published a vastly important work, On the Origin of Species by Means of Natural Selection. For centuries, man had been seen as a created species, distinct from any other animal. Then, Darwin persuasively argued that mankind and other species are descended from common ancestors. His theory of "natural selection", also known as "survival of the fittest", explains how life evolved through natural processes.

Two Treatises of Government

Two Treatises of Government is a work of political philosophy that outlined a concept foreign to the American people who, at the time, were still under English monarchy. This concept is what we now call democracy and advocated for a system in which all people were afforded rights to freedom and property ownership. The book was intended to push forward the ideas on contract theory and natural rights. Thomas Jefferson borrowed many of the ideas of Two Treatises of Government while writing the Declaration of Independence.

Publisher's Summary

Institutionalism is an economic point of view that emphasizes the role of social organization and structure in modern economic life. Thorstein Veblen (1857-1929), an American son of Norwegian immigrants, was instrumental in creating this school of thought in the early twentieth century, and he vigorously attacked what he regarded as the privileged "leisure class" in America.

To institutionalists, the important "institutions" of economic life include customs, habits, morals, and laws. These are believed to be more important in shaping economic life than are marketplace principles. Institutionalists emphasize a historical interpretation of social life, asserting that economic generalizations should be relevant to time and place. Institutionalist ideas greatly influenced economic policies that were created in response to the Great Depression.